Natural gas price in Europe plunged on Monday following the easing of supply concerns. Dutch TTF front-month futures – the European benchmark – dropped to 98.58 euros per megawatt-hour (MWh) earlier in the day. As at the time of writing, it was at 113.57 euros; down by 10.67%. The UK equivalent also dropped by 14%.
Fundamentals
Early on Monday, benchmark futures for natural gas prices in Europe plunged below the psychologically crucial level of 100 euros/MWh. Indeed, this is the first time that Dutch TTF futures dropped past the aforementioned level since June.
Weather
As has been the case in recent months, weather patterns have largely influenced natural gas price in Europe. In particular, the bulls have maintained control over the market amid concerns over heightened demand/supply imbalance ahead of the winter season.
Interestingly, weather forecasts in the region suggest that in the new week, temperatures will be about 4-8 degrees Celsius higher than the season’s average. The warmer -than-usual weather is expected to continue into November; delaying the heating season.
Supply outlook
The expected rise in temperatures have given natural gas storage facilities additional time to continue building on their inventories. Notably, intensified imports of liquefied natural gas have helped boost stockpiles above the normal levels for this time of the year.
As at Sunday, storage facilities within the European Union were 93.4% full. Indeed, Germany and Italy – two of the continent’s largest markets – have recorded even higher figures. With the subsequent decline in the storage capacity, spot natural gas prices have dropped sharply as a way of creating space for more inventories.
Isn’t a trend reversal yet
On the one hand, European natural gas price may record further losses in the short term. Even so, they remain around 3 times above the 5-year average for this time of year. Seeing that the winter season is around the corner, fresh supply concerns may sustain the commodity on an uptrend.
